Wood v Commercial First Business Ltd & Ors

Wood v Commercial First Business Ltd & Ors

The entitlement to relief for secret commissions does not depend on the existence of a fiduciary relationship but on whether the broker owed a duty to provide impartial and disinterested advice. In these cases, the brokers owed such a duty, and the commissions were fully secret due to the absence of disclosure as required by the terms of business. Therefore, the borrowers were entitled to rescission and recovery of the commissions.

Parties
Claimant/respondent: Frances Elizabeth Wood; First Defendant: Commercial First Business Limited; Defendant/appellant: Business Mortgage Finance 5 PLC; Defendant/appellant: Business Mortgage Finance 7 PLC; Claimant/appellant: Business Mortgage Finance 4 PLC; Defendant/respondent: Richard Miles Pengelly
Jurisdiction
England and Wales
Judgment Date
31 March 2021
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court
Outcome
Appeals dismissed
Legal Topics
Secret Commissions, Bribery, Fiduciary Duties, Rescission of Contract, Agency, Mortgage Fraud
Contract Law Equity Banking and Finance Secret Commissions Bribery Fiduciary Duties Rescission of Contract Agency +1 more

Case Brief

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Parties

Frances Elizabeth Wood

Claimant/respondent

Commercial First Business Limited

First Defendant

Business Mortgage Finance 5 PLC

Defendant/appellant

Business Mortgage Finance 7 PLC

Defendant/appellant

Business Mortgage Finance 4 PLC

Claimant/appellant

Richard Miles Pengelly

Defendant/respondent

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court

Legal Issues

  1. 1 Is a fiduciary relationship between the client and the broker a necessary pre-condition to the grant of relief against the payer of the undisclosed commission?
  2. 2 Did a fiduciary relationship exist between the client and the broker in these cases?
  3. 3 Are the commissions that were paid properly categorised as half-secret commissions?

Ratio Decidendi

The entitlement to relief for secret commissions does not depend on the existence of a fiduciary relationship but on whether the broker owed a duty to provide impartial and disinterested advice. In these cases, the brokers owed such a duty, and the commissions were fully secret due to the absence of disclosure as required by the terms of business. Therefore, the borrowers were entitled to rescission and recovery of the commissions.

Court Disposition

Appeals dismissed

Orders

  • Appeals in both cases dismissed
  • Borrowers entitled to rescission of the loan agreements and mortgages, subject to counter-restitution